TaxTMI 
TaxTMI 
2022 (8) TMI 773
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....of Rule 3 of CENVAT credit Rules, 2004 read with Rule 2(l) ibid; A show Cause Notice dated 04.03.2009, covering the period 2006-07 and 2007-08, was issued invoking the extended period, seeking to demand back the credit taken along with interest while proposing to levy penalty. The allegations in the Show Cause Notice were confirmed by Order-in-Original dated 26-02-2010. Thereafter periodic Show Cause Notices were issued and confirmed by the respective Orders-in- Original/Orders-in-Appeal as follows. Sl. No Appeal No SCN date OIO/ OIA Date Demand Confirmed Period 1. E-639/2010 04.03.2009 26.02.2010 61,44,78,463 April 2005 to December 2008 2. E-288/2011 27.01.2010 10.11.2010 10,96,33,738 January 2009 to December 2009 3. E-247/2012 07.09.2011 23.12.2011 20,85,94,049 January 2010 to March 2011 4. E-675/2012 17.11.2011 27.02.2012 4,27,70,920 April 201 to June 2011 E-675/2012 25.11.2011 3,85,11,701 July 2011 to September 2011 5. E-25288/ 2013 11.04.2012 06.11.2012 4,25,04,264 October 2011 to December 2011 do 18.05.2012 ....
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.... Ultra tech Cement Ltd 2010 (260) E.L.T. 369 (Bom.) (iv). ONGC 2013 (32) S.T.R. 31 (Bom.) (v). GTC Industries Ltd. [2008 (12) S.T.R. 468 (Tri. - LB)] 2.2. He submits that, in view of the above, the services provided by L&T qualify as "input service" in terms of Rule 2(l) of the Credit Rules as the Activity of Advertisement and Sales Promotion is specifically covered in the inclusive part of the definition; with the deletion of the phrase "activities relating to business" w.e.f. 01.04.2011, doubts arose regarding the availability of CENVAT Credit with respect to various services; The CBIC vide Circular No. 943/4/2011-CX., dated 29-4-2011 clarified that the definition of input services allows all credit on services used for clearance of final products up to the place of removal; moreover, activity of sale promotion is specifically allowed and on many occasions the remuneration for same is linked to actual sale; reading the provisions harmoniously it is clarified that credit is admissible on the services of sale of dutiable goods on commission basis. He submits that divergence of view arose owing to the conflicting decisions of two High Courts in the c....
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....ission agent involves an element of sales promotion. • * Further, this entire controversy of difference between sales promotion and sales commission agency has been put to rest with the introduction of the amendment in 2016 which has clearly stated that even services of causing sales on commission basis would also be considered as Sales Promotion; the decision of the Gujarat High Court in the case of Cadila (supra) was rendered before the introduction of this amendment and accordingly, is not relevant any further; • the agreement dated 01.02.1998 between the Appellant and L & T Ltd shows that L&T was engaged/involved in Sales promotion and marketing as defined by the Hon'ble Gujarat High Court. 3. Learned Counsel submits that extended period of limitation can be invoked when there is a positive act of willful suppression with an intent to evade payment of duty as held in the cases of Pahwa Chemicals Private Limited 2005 (189) ELT 257 (SC), Continental Foundation in 2007 (216) ELT 177 (SC) and Damnet Chemicals Pvt Ltd in 2007 (216) ELT 3 (SC); in the &nbs....
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....that as per the definition of "input service" provided in Rule 2(l) of CCR,2004, to qualify as an input service, the fundamental criteria is that the service has to be used by manufacturer in or in relation to the manufacture of final products; in the instant case, M/s L & T Ltd have provided the services as a sole selling agent to the appellants; these services do not have any connection with the manufacture of final products by the appellants as these services are in the nature of post-manufacturing activities; the said services are related only to sales and not manufacture; appellant is paying sales commission to M/s L & T for the services rendered as sole selling agent, in terms of the contract; the said services are neither advertisement nor sale promotion and are not covered under the inclusive part of the definition of input service also; the appellant's contention that advertisement, sales promotion, market research and customer support, are carried on by M/s L&T as a continuous activity cannot be accepted as rightly held by the adjudicating authority (Para 20 of OIO dated 26/2/2010). 5.1. He submits that the appellant's contention that Cenvat Credit is to be allowed whe....
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.... respect to the sales of equipment in territory A, L&T Komatsu hereby appoints L&T as its exclusive agent to market the equipment and provide product support for the equipment and L&T accepts such appointment. Article 3.1. For the services rendered by L&T towards the sale and service of equipment in territory A, L&T Komatsu shall pay agency commission to L&T, and the rate and the other terms shall be stipulated in Annexure B attached thereto. Article 9. Advertisement: L&T shall promote sales of products by means of advertising, exhibition and demonstration of products or any other means suitable and territories at its own account. Article 13(2). Servicing Products: (2) Field Campaign L&T, shall at L&T Komatsu, rendered a field campaign for updating product, requested by L&T Komatsu, in accordance with the terms of the "service letter" which will be furnished to L&T by L&T Komatsu from time to time. 7. We find that Annexure A lists out Komatsu products and L&T products and the "Agency Commission" for the products is stated to be on a percentage basis of actual sales in Territory A and a certain percentage of list price in Territory B and in res....
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....iew whether the transaction amounts to transfer of right or not cannot be determined with reference to a particular word or clause in the agreement. The agreement has to be read as whole, to determine the nature of the transaction. From a close reading of all the clauses in the agreement, it appears to us that the contractor is entitled to make use of the machinery for purpose of execution of the work of the petitioner and there is no transfer of right to use as such in favour of the contractor. We have reached this conclusion because the effective control of the machinery even while the machinery is in the use of the contractor is that of the petitioner company. The contractor is not free to make use of the same for other works or move it out during the period the machinery is in his use. The condition that he will be responsible for the custody of the machinery while the machinery is on the site does not militate against the petitioner possession and control of the machinery. For these reasons, we are of the opinion that the transaction does not involve transfer of right to use the machinery in favour of the contractor." 9.1. We also find that it was also held by the Apex Cour....
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....ion agents for sale of final products is available as credit according to the inclusive part of the definition of input service, which includes services in relation to sales promotion. Reference was made to the definition of business auxiliary service as defined under Section 65(19) of the Finance Act, 1994 which lays down that business auxiliary service means any service in relation to (i) promotion or marketing or sale of goods produced or provided by or belonging to the client or (ii) promotion or marketing of service provided on behalf of the client and includes services as a commission agent. (i) The Adjudicating Authority held that on a perusal of the definition of commission agent as defined under clause (a) to the Explanation under Section 65(19) of the Act, a commission agent is a person who acts on behalf of another person and causes sale or purchase of goods. In other words, he is directly responsible for selling or purchasing on behalf of another person and that such activity cannot be considered as sales promotion. According to the Adjudicating Authority there is a clear distinction between sales promotion and sale. A commission agent is directly concerned wit....
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....s, therefore, a service in relation to the activity relating to business which is also covered by the includes portion of the definition. It was argued that the show cause notice had proposed to deny CENVAT credit merely on the ground that the said service is a post-manufacturing activity and is not used directly or indirectly in the manufacture of final products, completely ignoring the includes portion of the definition. It was also submitted that the service tax paid to a commission agent for sale of final product would fall within the ambit of sales promotion which is a business auxiliary service and would, therefore, also fall within the purview of input service. (v) In the backdrop of aforesaid facts and contentions, reference may be made to the definition of business auxiliary service as defined under Section 65(19) of the Finance Act, 1994, which to the extent the same is relevant for the present purpose reads thus : Business Auxiliary Service means any service in relation to, (i) promotion or marketing or sale of goods produced or provided by or belonging to the client; or promotion or marketing of service provided on behalf of the client; ....
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....so been defined as stimulation of sales achieved through contests, demonstrations, discounts, exhibitions or tradeshows, games, giveaways, point-of-sale displays and merchandising, special offers, and similar activities. The Advanced Law Lexicon by P. Ramanatha Aiyar, third edition, describes the term sales promotion as use of incentives to get people to buy a product or a sales drive. In the case of Commissioner of Income-tax v. Mohd. Ishaque Gulam, 232 ITR 869, a Division Bench of the Madhya Pradesh High Court drew a distinction between the expenditure made for sales promotion and commission paid to agents. It was held that commission paid to the agents cannot be termed as expenditure on sales promotion. (viii) From the definition of sales promotion, it is apparent that in case of sales promotion a large population of consumers is targeted. Such activities relate to promotion of sales in general to the consumers at large and are more in the nature of the activities referred to in the preceding paragraph. Commission agent has been defined under the explanation to business auxiliary service and insofar as the same is relevant for the present purpose means any person who ac....
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....thin the purview of the main or inclusive part of the definition of input service as laid down in Rule 2(l) of the Rules. (ix) As regards the contention that in any event the service rendered by a commission agent is a service received in relation to the assessees's activity relating to business, it may be noted that the includes part of the definition of input service includes activities relating to the business, such as accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, and security. The words activities relating to business are followed by the words such as. Therefore, the words such as must be given some meaning. In Royal Hatcheries (P) Ltd. v. State of A.P., 1994 Supp (1) SCC 429, the Supreme Court held that the words such as indicate that what are mentioned thereafter are only illustrative and not exhaustive. Thus, the activities that follow the words such as are illustrative of the activities relating to business which are included in the definition of input service and are not exhaustive. Therefore, activities relating to business could also be other than the activities mentio....
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....e nature of appointing partnership firm by the name Yarn Trading as a stockist for the sales of the appellant-company. Very preamble to the agreement shows that the appellant- company was desirous of appointing consignment stockist for the sales of its product and the partnership firm had approached the appellant with a request to be so appointed. As per Clause (2) of the agreement, company would transfer its stock of yarn to the consignment stockist at the price fixed by company from time to time on advance payment basis along with deposits. Clause (3) provided that consignment stockist would bear the insurance coverage for materials stored at its godown. As per Clause (4), all expenses incurred in selling or storing the products would be borne by consignment stockist. Clause (7) pertains to the commission to be paid to the consignment stockist which was graded depending on the sales turnover. 7. Thus predominantly the entire agreement was one in the nature of appointing a partnership firm as stockist of the appellant-company who would upon being supplied the goods in question would store the same and dispose of in the market at agreed rates upon which would receive certa....
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....se of Cadila (supra) and in view of our discussion as above, no such reference to larger bench is warranted. 13. Coming to the issue of limitation, the appellants submit that there is no positive act or wilful suppression with an intent to evade payment of duty; the entire controversy pertains to the interpretation of law and there is no factual suppression involved; the fact of availment of CENVAT credit of the service tax paid on the Commission paid to M/s L&T was brought to the knowledge of the Department vide their letter dated 05.10.2005 and therefore, the issue was very much in the knowledge of the Department; therefore, it is not open for the Department to invoke extended period of limitation. We find that the appellant's contention is acceptable. The appellants have also submitted that penalty under Rule 25 of the CENVAT Credit Rules has been wrongly imposed; it is a settled position that in the absence of evidence showing clandestine removal, Rule 25 of Cenvat Credit Rules, 2004, cannot be invoked as held in GAL Aluminium Extrusions Pvt. Ltd. 2011 (247) ELT 582; the issue involved pertains to eligibility of CENVAT credit on input services and there is no dispute regardi....